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    2688   KYG3066L1014

ENN ENERGY HOLDINGS LIMITED

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Toshiba shares slump after sale of U.S. LNG business cancelled

04/12/2019 | 03:32am EDT
The logo of Toshiba is seen as shareholders arrive at Toshiba's extraordinary shareholders meeting in Chiba

TOKYO (Reuters) - Toshiba Corp shares fell by the most in two months on Friday after an agreement to offload its U.S. liquefied natural gas (LNG) business collapsed, a blow for the Japanese company which has been shedding assets to turn around its business.

Toshiba said late on Thursday that China's ENN Ecological Holdings Co had scrapped an agreement to take over the LNG business due to a failure to get approvals from shareholders and a U.S. panel that monitors foreign investments.

Toshiba shares fell as much as 5.4 percent before closing down 2.7 percent, the biggest drop since Feb. 12. The broader market gained 0.7 percent.

Toshiba must now look for a new buyer for the business that it previously said may cause losses of as much as 1 trillion yen ($9 billion).

Spot LNG prices are trading at about half the level they were when Toshiba agreed to pay ENN more than $800 million to take over its U.S. operations.

A failure to find a buyer could derail Toshiba's recovery from the fallout of the bankruptcy of its U.S. nuclear power unit Westinghouse, analysts have said.

"The challenge in obtaining U.S. approvals provided an opportunity for ENN to walk away from a deal that will be out of the money in the near term following a collapse in LNG spot prices," said Saul Kavonic, head of energy research for Australia at Credit Suisse.

"At current LNG spot prices, it will be a challenge to bring U.S. LNG volumes into Asia on a cash cost basis, let alone factoring in an additional processing tariff," he said.

Toshiba stunned the market in 2013, when it decided to enter the LNG business. With no experience in shipping or the logistics of the gas and LNG business it seemed an odd fit, analysts said at the time.

Toshiba's plan was to pitch LNG supplies as a sweetener to potential Asian buyers of its turbines used in combined cycle gas-fired power plants.

The company signed up to take 2.2 million tonnes of LNG annually from the Freeport LNG export plant in Texas, construction of which is almost complete.

The arrangement requires Toshiba to pay a processing fee for the LNG, regardless of whether it takes the fuel.

The company has been trying to sell the business since at least 2015.

"Toshiba has around a year to find a new buyer or be faced with the prospect of paying for capacity that they aren't using," said Nicholas Browne, gas and LNG director at consultancy Wood Mackenzie in Singapore.

"Finding a buyer in this timeframe could be pretty difficult," he said.

(Reporting by Aaron Sheldrick; Editing by Stephen Coates)

By Aaron Sheldrick


© Reuters 2019
Stocks mentioned in the article
ChangeLast1st jan.
ENN ENERGY HOLDINGS LIMITED 0.86% 141 End-of-day quote.23.90%
ENN NATURAL GAS CO., LTD. -3.34% 20.86 End-of-day quote.53.50%
LETS HOLDINGS GROUP CO., LTD. -2.84% 6.5 End-of-day quote.-16.45%
LOOK HOLDINGS INCORPORATED 1.79% 1425 End-of-day quote.48.90%
MIRAINOVATE CO., LTD. 0.00% 24 End-of-day quote.-20.00%
TOSHIBA CORPORATION 0.00% 4720 End-of-day quote.63.60%
US DOLLAR / JAPANESE YEN (USD/JPY) 0.02% 109.91 Delayed Quote.6.30%
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Sales 2021 89 695 M 13 873 M 13 873 M
Net income 2021 7 288 M 1 127 M 1 127 M
Net Debt 2021 9 849 M 1 523 M 1 523 M
P/E ratio 2021 18,1x
Yield 2021 1,96%
Capitalization 132 B 20 425 M 20 424 M
EV / Sales 2021 1,58x
EV / Sales 2022 1,33x
Nbr of Employees 35 735
Free-Float 67,3%
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Yu Ying Zhang President & Executive Director
Jian Feng Liu Chief Financial Officer
Yu Suo Wang Chairman
Zhi Xiang Ma Independent Non-Executive Director
Po Kwong Yuen Independent Non-Executive Director